[DigitalToday reporter Sangyup Oh] Prosecutors have begun a forced investigation into Meritz Securities' headquarters and the office of a vice chairman at Meritz Financial Group Holding on suspicion that executives at its affiliates used material non-public information. After news of the raids spread, Meritz Financial Group Holding shares at one point plunged more than 7 percent during the session.

On Jan. 9, the legal and financial investment industries said the Financial Investigation Division 1 of the Seoul Southern District Prosecutors' Office sent investigators on Jan. 8 to Meritz Securities' headquarters in Yeouido, Seoul, and the office of Meritz Financial Group Vice Chairman Kim Yong-beom, seizing computer hard drives and related documents.

Through the raids, prosecutors are closely examining whether internal information was illegally used during Meritz Financial Group's 2022 process of bringing affiliates in as wholly owned subsidiaries.

The focus of the investigation is suspected use of undisclosed information related to the "Meritz One" project announced in November 2022. At the time, Meritz Financial Group announced a plan to bring Meritz Fire & Marine Insurance and Meritz Securities in as wholly owned subsidiaries through a comprehensive stock swap. After the announcement, shares of Meritz Financial Group and its affiliates surged, hitting the daily upper limit day after day.

Financial authorities and prosecutors believe a former Meritz Fire & Marine Insurance CEO identified as A and some executives obtained the merger information in advance and bought shares through accounts in family members' names, then sold after the price rose to reap several hundred million won in gains. In July last year, the Securities and Futures Commission under the Financial Services Commission filed a complaint with prosecutors against them on suspicion of violating the Capital Markets Act.

The latest raids are an extension of the first round of forced investigations conducted in September last year at Meritz Financial Group and Meritz Fire & Marine Insurance headquarters and the homes of related individuals. With prosecutors expanding the probe to include Vice Chairman Kim's office, the industry is speculating the investigation could widen to whether senior executives were involved or whether there was organised involvement at the group level.

As news of the forced investigation spread, Meritz Financial Group shares took a direct hit. The stock closed down 5.95 percent from the previous session at 101,200 won, and at one point fell below 100,000 won during the session. Concentrated selling by foreign investors and institutions sharply chilled sentiment.

A prosecution official said it plans to summon relevant people to question them on specific allegations once analysis of seized materials is complete. The official said it would respond strictly to acts that damage fairness in the capital market by using undisclosed information.